Excerpt:sales tax - natural justice - claim from assessment denied on ground that sale transactions with registered dealers were not genuine - respondent relied on oral evidence given to private assistant of collector and letter of one such dealer - petitioner's request to cross examine such dealer denied - no reason given for not disclosing letter to petitioner - denial of opportunity to cross examine dealer whose evidence was relied upon by department vitiates proceedings -order of respondent denying claim illegal for non observance of principles of natural justice.
- - keshavji hirji are not genuine is contrary to the rules of natural justice, arbitrary, perverse and illegal ?' 2. the facts giving rise to this reference are as follows :the applicants were registered under the bombay sales.....kania, j.1. this is a reference under section 34(3) of the bombay sales tax act, 1953. the question referred to us for our consideration is as follows : 'whether the finding that the sales made to messrs. keshavji hirji are not genuine is contrary to the rules of natural justice, arbitrary, perverse and illegal ?' 2. the facts giving rise to this reference are as follows : the applicants were registered under the bombay sales tax act, 1946, as well as under the bombay sales tax act, 1953, and were carrying on business as grocery and kirana merchants at the relevant time. the period of assessment is from 1st april, 1950, to 31st october, 1952. the applicants were assessed under section 11(2) of the bombay sales tax act, 1946, by the sales tax officer, b ward, bombay, who pointed out, in.....

Judgment:

Kania, J.

1. This is a reference under section 34(3) of the Bombay Sales Tax Act, 1953. The question referred to us for our consideration is as follows :

'Whether the finding that the sales made to Messrs. Keshavji Hirji are not genuine is contrary to the rules of natural justice, arbitrary, perverse and illegal ?'

2. The facts giving rise to this reference are as follows : The applicants were registered under the Bombay Sales Tax Act, 1946, as well as under the Bombay Sales Tax Act, 1953, and were carrying on business as grocery and kirana merchants at the relevant time. The period of assessment is from 1st April, 1950, to 31st October, 1952. The applicants were assessed under section 11(2) of the Bombay Sales Tax Act, 1946, by the Sales Tax Officer, B Ward, Bombay, who pointed out, in his assessment order dated 20th August, 1953, that the actual sales by the applicants to the registered dealers were claimed at Rs. 87,47,904-13-6 and held that, out of these sales, sales worth Rs. 18,27,053-3-6 could not be allowed as these did not appear to be genuine transactions. It may be mentioned that no particulars have been given by the Sales Tax Officer regarding these sales, which were disallowed on the ground that they were not genuine transactions. Although the order of the Sales Tax Officer does not make it clear, from the judgment of the Tribunal it is clear that the sales to M/s. Keshavji Hirji, which are the subject-matter of this reference, were not disallowed by the Sales Tax Officer. The applicants appealed against the order passed by the Sales Tax Officer to the Assistant Collector of Sales Tax. During the pendency of this appeal, on 12th March, 1956, the Assistant Collector of Sales Tax issued a notice to the applicants calling upon them to prove that the sales shown in the schedule appended to the said notice were made to bona fide registered dealers in goods faith and that the signatures obtained on the declarations were those of the persons by whom they purported to have been signed or by some responsible persons duly authorised by the purchasing dealers in that behalf. At the end of the said show cause notice the applicants were specifically called upon to show cause why the sales of Rs. 6,25,247-11-3 purported to have been made to M/s. Keshavji Hirji during the period under appeal should not be disallowed as the signatures obtained on the declarations did not appear to be genuine. From the schedule appended to the notice it is clear that the sales proposed to be disallowed were sales to M/s. Keshavji Hirji, M/s. S. G. Servan, M/s. Parsram Odhavdas and M/s. Bhagwandas Hotchand. By their reply dated 9th April, 1956, addressed to the Assistant Collector of Sales Tax, the applicants contended that the sales shown in the aforesaid schedule were made to bona fide registered dealers in good faith and the signatures obtained by the applicants on the declarations were those of the persons by whom they purported to have been signed or by some responsible persons duly authorised by the purchasing dealers in that behalf. The applicants contended that the aforesaid sales were effected to bona fide registered dealers and the applicants did not effect any sale to any dealer who was not registered by the sales tax department. The applicants by this reply further pointed out that they had obtained declarations from the persons authorised by the dealers or from the registered dealers and the declarations signed by them were true and that the applicants had satisfied themselves that the purchasers were bona fide registered dealers by making enquiries in the market. By this letter the applicants informed the Assistant Collector that they had made enquiries with a view to produce those persons, but their efforts had been fruitless and the applicants suggested that summons be issued to them by the Assistant Collector to find out whether the sales effected by the applicants were true or not and that the applicants might be given an opportunity to cross-examine those persons. By this letter the applicants also offered that in case the Assistant Collector was not satisfied with the explanation given by the applicants, they should be given a further opportunity to submit the circumstantial evidence referred to in the said letter. Regarding certain sales to M/s. S. S. Lekhraj & Co., which had been disallowed by the Sales Tax Officer, the applicants pointed out that Lekhraj was a displaced person from Pakistan and made purchases from the applicants against payment of cash. They also pointed out that Lekhraj did not pay the taxes and the Government had filed a complaint against Lekhraj in the Court of a Presidency Magistrate and the evidence of one Ramji Vasanji, a partner of the applicants, was taken in that matter. This evidence showed that the applicants had sold goods worth Rs. 9,76,182-5-6 to Lekhraj and it was admitted by Lekhraj that he had purchased the goods from the applicants. The applicants by this letter protested against the department proposing to disallow the sales effected by the applicants to Lekhraj without considering this evidence and pointed out that the department could not blow hot and cold at the same time. Regarding the sales to M/s. Keshavji Hirji it was pointed out by the applicants that the sales made to M/s. Keshavji Hirji were in good faith and the signatures which had been obtained on the declarations were those of Keshavji Hirji. The difference in writing the work 'Keshavji' in Gujarati, which was pointed out in the aforesaid schedule, was explained on the ground that it was not uncommon that many persons spelt their names differently on different occasions. It was pointed out that these sales had already been allowed by the Sales Tax Officer and should not be added as disallowances. There was a hearing before the Assistant Collector at which there was considerable discussion regarding the sales to M/s. Keshavji Hirji and the declarations signed by Keshavji. By his order dated 12th April, 1956, K. B. Rao, the Assistant Collector of Sales Tax, allowed such of the sales to M/s. S. S. Lekhraj & Co. during the period from 1st October, 1950, to 31st March, 1951, as were found recorded in the purchase-cum-sale book of M/s. S. S. Lekhraj. The sales to M/s. Parsram Odhavdas and M/s. S. G. Servan & Co. were disallowed mainly on the ground of irregularities in the signatures on the declarations. The sales to M/s. Bhagwandas Hotchand were allowed as the declarations were signed by the purchasing dealer himself. No addition was made on the ground of sales to M/s. Keshavji Hirji with the result that it was accepted that these were genuine sales to a registered dealer. The applicants preferred a revisional application against the order of the Assistant Collector. During the pendency of this revisional application, on 16th May, 1958, the Additional Collector of Sales Tax, Bombay City Division (Revision), addressed a letter to the applications purporting to be a notice as required under section 30 or 31 of the Bombay Sales Tax Act, 1953, stating that it was proposed to pass an order taxing the aforesaid sales alleged to have been made to M/s. Keshavji Hirji, the holders of R.C. No. HA 164 during the period from 30th July, 1951, to 28th July, 1952, and calling upon the applicants that if they had any objection against the order they should attend personally or by a legal practitioner or by a duly authorised agent to support the said objection at the office of the Additional Collector of Sales Tax at the time stated in the said notice. By their letter dated 10th December, 1958, the applicants showed cause against the notice issued by the Additional Collector. Along with the said letter the applicants sent to the Additional Collector two affidavits, one made by one Damji Vasanji, a partner of the applicants, and the other made by Manilal Bhavanji, a former employee of the applicants, but who was, at the time when the affidavit was made, doing independent business of brokerage. By this letter the applicants stated that they were prepared to produce the said two persons for examination if required. In his affidavit, which was affirmed on 6th December, 1958, Damji Vasanji, inter alia, stated that he was a partner of the applicants and that the applicants had sold goods worth Rs. 6,25,247-11-3 during the period from 1st April, 1950, to 31st October, 1952, to M/s. Keshavji Hirji, who were registered under the Bombay Sales Tax Act, 1946, and had given declarations to the applicants. He further stated that these declarations were signed by Keshavji Hirji personally. Manilal Bhavanji in his affidavit affirmed on the same day stated that he was doing brokerage business at Dana Bunder for the last three years or so. He further averred that Keshavji Hirji was coming to the applicants' shop in 1950-51 for purchasing vegetable products from them and that Keshavji Hirji had purchased good worth some lakhs from the applicants during the period from 1st April, 1950, to 31st October, 1952. The Additional Collector then issued a questionnaire dated 29th September, 1959, to the applicants. Paragraph 3 of the said questionnaire stated that cash sales of Rs. 6,25,247-11-3 alleged to have been effected to Keshavji Hirji were proposed to be taxed by an order under section 34 of the Bombay Sales Tax Act, 1953, for which the notice in form XXIV had already been issued to the applicants. The relevant portion of the said paragraph in the said questionnaire runs as follows :

'The rojmel maintained by Shri Keshavji Hirji for the period from 30th October, 1951, to 11th August, 1952, and at present lying in the custody of the Sales Tax Officer, Enforcement Branch, does not show any entries in respect of the alleged sales to him by you. Further, the oral statement made by Shri Keshavji Hirji on 10th September, 1952, before the P.A. to the Collector of Sales Tax as well as his letter dated 24th November, 1952, go to prove that he had not effected any purchases from you.

3. In the circumstances, have you any evidence, documentary or otherwise, to prove that the sales in question were in reality made to Shri Keshavji Hirji holding R.C. No. HA 164 ?'

4. In their reply to the questionnaire, which is contained in the letter dated 6th November, 1959, addressed by the applicants to the Additional Collector of Sales Tax, the applicants stated that the sales effected to Keshavji Hirji were well-supported by the declarations signed by him and that these sales had been allowed by the Sales Tax Officer after verification of the declarations. It was pointed out in the said letter that the Assistant Collector had issued a notice to show cause as to why the applicants' taxable turnover should not be enhanced by the amount of sales effected by the applicants to Keshavji Hirji and that there was no evidence against the applicants except the fact that Keshavji Hirji became an absconder and did not pay the taxes. It was pointed out by the applicants that after discussion at great length with the Assistant Collector he decided that no action should be taken in that matter. By this reply the applicants recorded that till the receipt of the said questionnaire, the applicants were never informed of the so-called letter written by Keshavji Hirji or the interview which Keshavji had with the P.A. (Personal Assistant) to the Collector of Sales Tax. The applicants reiterated that the sales were effected by them to Keshavji Hirji and the goods were purchased by Keshavji from the applicants. By this reply, the applicants specifically requested that they should be given an opportunity to read the letter addressed by Keshavji Hirji in the original. The applicants submitted that the statement made by Keshavji Hirji was absolutely false and must have been made by him to save his own skin and nothing else. The said revision application of the applicants was heard by the Deputy Commissioner of Sales Tax. By his order dated 22nd July, 1961, the Deputy Commissioner, after referring to the proposed disallowance of the sales to Keshavji Hirji, and to the notice in form XXIV, which was served on the applicants, revised the order passed by the Assistant Collector suo motu and, inter alia, disallowed the sale made to M/s. Keshavji Hirji. In his order the Deputy Commissioner has stated that as regards the oral statement made by Keshavji Hirji before the P.A. to the collector of Sales Tax and the letter of Keshavji Hirji dated 24th November, 1952, the applicants could not be permitted to read the original letter as it would be against public interest but that the gist of the information laid before the department was communicated to the applicants. The question which the Deputy Commissioner posed before himself was whether, in the light and circumstances and the facts before him, it could be said that the sales in question were not made genuinely to the said dealer, viz., Keshavji Hirji. He observed that Keshavji Hirji had himself furnished the information that he did not effect any purchases from the applicants and that this information was fully corroborated by the entries in his account books in the possession of the department. He further held that the scrutiny of the account books showed that Keshavji Hirji was not financially so well-off as to make such large purchases from the applicants within a short time and that it could not be believed that such a man of straw could make cash purchases of huge quantities of goods so frequently. The Deputy Commissioner observed that the applicants could not produce any evidence of facts or circumstances to rebut this allegation. As far as the declarations were concerned, he went on to say that it could not be surmised under what circumstances these declarations were furnished by Keshavji Hirji and that the genuineness of these declarations had also not been firmly established. Regarding the evidence contained in the affidavits of Manilal Bhavanji and Damji Vasanji, the Deputy Commissioner held that this evidence was unacceptable as both these persons were interested and further held that no attempt to rebut the information given by Keshavji Hirji himself had been made. The applicants preferred a revision application against the order of the Deputy Commissioner to the Tribunal, and the Tribunal by its judgment and order dated 29th November, 1963, dismissed the said application. As far as the sales to M/s. Keshavji Hirji were concerned, after setting out the facts already referred to earlier, the Tribunal has observed that the applicants should have produced the necessary evidence to rebut the allegation made by Keshavji and that the information given by Keshavji was fortified by the entries in his account books. The Tribunal accepted the reasoning and the conclusions of the Deputy Commissioner. It was contended before the Tribunal that the order of the Deputy Commissioner was bad on the ground that the rules of natural justice had not been complied with. The Tribunal held that no request was made by the applicants to examine or cross-examine Keshavji. The Tribunal observed that the necessary portion of the letter sent by Keshavji had been made available to the applicants. This observation appears to be clearly erroneous as it is nowhere on the record that any portion of the letter of Keshavji, written on 24th November, 1952, was ever made available to the applicants. In fact, it is common ground that all that the Deputy Commissioner did was to convey the gist of the information given by Keshavji Hirji to the applicants. The Tribunal rejected the contention of the applicants that the rules of natural justice had not been complied with and dismissed the revision application, as we have already set out earlier. This reference arises out of the judgment and order of the Tribunal and the aforementioned question has been referred pursuant to an order made by a Division Bench of this Court.

5. The first contention of Mr. Shah, the learned counsel for the applicants, was that there was a clear violation of the rules of natural justice by the Deputy Commissioner in passing his order as the applicants were not given any opportunity to cross-examine Keshavji. In this regard the facts we have narrated earlier show that in the letter of 9th April, 1956, addressed to the Assistant Collector of Sales Tax, the applicants had expressly desired to cross-examine all the dealers, sales to whom were proposed to be disallowed, including Keshavji. In their reply to the questionnaire issued by the Additional Collector, the applicants had pointed out that Keshavji had become an absconder and had not paid his taxes. The applicants had further requested for an opportunity to read the letter addressed by Keshavji on which reliance was sought to be placed by the Deputy Commissioner, as we have already pointed out. It was contended by Mr. Shah that, in view of this, it was obligatory on the Deputy Commissioner to have offered Keshavji Hirji for cross-examination.

6. It was, on the other hand, contended by Mr. Andhyarujina, the learned counsel for the respondent, that the request for an opportunity to cross-examine Keshavji Hirji had been made by the applicants only to the Additional Collector of Sales Tax. The proceedings before the Assistant Collector of Sales Tax, according to Mr. Andhyarujina, had already ended successfully in favour of the applicants as far as the sales to Keshavji Hirji were concerned. It was submitted by him that the notice issued by the Additional Collector of Sales Tax on 16th May, 1958, gave rise to the proceedings in suo motu revision, which were completely independent of the proceedings before the Assistant Collector of Sales Tax and the revision application which had been preferred by the applicants against the order of the Assistant Collector. It was urged by Mr. Andhyarujina that in view of the fact that no specific demand had been made by the applicants to the Additional Collector of Sales Tax or the Deputy Commissioner that they should be given an opportunity to cross-examine Keshavji, there was no violation of the principles of natural justice by the Deputy Commissioner of Sales Tax.

7. Although there was some controversy regarding the question as to whether a suo motu revision could amount to an independent proceeding, what we are really concerned in this case is whether it was an independent proceeding in the case before us. In this regard, it must be noticed that the notice issued by the Additional Collector of Sales Tax on 16th May, 1958, was issued during the pendency of the revisional application preferred by the applicants against the order of the Assistant Collector of Sales Tax. The questionnaire issued by the Additional Collector of Sales Tax refers both to the sales to M/s. Keshavji Hirji as well as to the sales disallowed by the Assistant Collector of Sales Tax and a single reply has been given to this questionnaire. The order of the Deputy Commissioner dated 22nd July, 1961, is a single order and deals with the revisional application of the applicants as well as the question of sales to M/s. Keshavji Hirji. It is significant that in the heading to this order there is no reference at all to the notice of suo motu revision, though there was such a notice issued on 16th May, 1958. The heading only refers to the revision application received on 25th May, 1956, from the applicants against the order passed by the Assistant Collector of Sales Tax. The narration of facts in the order makes it abundantly clear that the notice dated 16th May, 1958, has been issued merely in the course of the revision application preferred by the applicants, in view of the fact that an adverse order was proposed to be passed against the applicants regarding the sales to M/s. Keshavji Hirji, which had been allowed by the Assistant Collector as having been made to a registered dealer. The heading of this order clearly shows that the papers of the case submitted by the Sales Tax Officer and the Assistant Collector of Sales Tax had been perused by the Deputy Commissioner of Sales Tax before passing the order. On these facts and circumstances, we have no doubt at all that in the present case there was no independent proceeding pursuant to the notice dated 16th May, 1958, and that all the proceedings were dealt with together as a single proceeding. In view of this, in our opinion, the demand for the cross-examination of Keshavji Hirji and other purchasing dealers made by the applicants to the Assistant Collector still held good and should have been taken note of by the Deputy Commissioner. The demand made by the applicants in reply to the questionnaire submitted by the Additional Collector, requesting for an opportunity to read the letter of Keshavji in the original, also indicated that the applicants might desire to cross-examine Keshavji Hirji, and at least made one thing clear, namely, that the demand for cross-examination of Keshavji had not been given up. In these circumstances, we must proceed on the footing that there was a demand by the applicants before the Deputy Commissioner for the cross-examination of Keshavji and the Deputy Commissioner still did not offer Keshavji for cross-examination. We may also point out that, in our view, there is no substance in the contention of Mr. Andhyarujina that the only question before the Assistant Collector, regarding the sales to M/s. Keshavji Hirji, was that these should be disallowed merely on the ground of irregularities in the signatures on the declarations. The opening part of the notice dated 12th March, 1956, issued by the Assistant Collector of Sales Tax to the applicants clearly shows that the applicants were called upon to prove that the sales referred to in the schedule thereto, including the sales to M/s. Keshavji Hirji, were made to bona fide registered dealers. It is quite clear to us, on a reading of this notice of the Assistant Collector, that the question of alleged irregularities in the signatures on the declarations was merely an additional point which the applicants were called upon to meet in connection with the allowance of sales to M/s. Keshavji Hirji.

8. It was sought to be contended by Mr. Andhyarujina that it was not open to the applicants at all to complain about the violation of the principles of natural justice in connection with their not being offered an opportunity to cross-examine Keshavji, as no such ground had been taken in the memorandum of revision to the Tribunal. In our view, there is no substance in this contention at all, because the memorandum of revision specifically states that the grounds are liable to be altered or added to and this contention has been specifically advanced by the applicants before the Tribunal and rejected by the Tribunal.

9. The question which we have now to consider is as to what is the effect of the Deputy Commissioner not having afforded an opportunity to the applicants to cross-examine Keshavji, even though there was a demand for such cross-examination. Reference may be usefully made in this connection to the statement of law in paragraph 76 of Halsbury's Laws of England (4th Edition), Vol. I, which runs as under :

'Rejection of a request to be permitted to cross-examine witnesses who appear at a hearing for the other side will normally be construed as a breach of natural justice; but it is not a necessary ingredient of natural justice that one who has submitted relevant evidence in writing or ex parte must be produced for cross-examination, provided that the evidence is disclosed and an adequate opportunity is given to reply to it.'

10. Reference may also be made to the decision of a Division Bench of the High Court of Punjab and Haryana at Chandigarh in Pahar Chand & Sons v. State of Punjab [1972] 30 S.T.C. 211, where it was sought to be contended by the standing counsel on behalf of the State of Punjab that supply of a copy of the accounts of the third party would be sufficient material particulars, if such accounts were proposed to be relied on by the department, and the assessee could not be permitted to test the correctness of those accounts by cross-examination. The learned Judges of the Punjab and Haryana High Court have cited with approval the following observations of the Orissa High Court in Muralimohan Prabhudayal v. State of Orissa [1970] 26 S.T.C. 22 :

' ....... We are unable to accept this contention which is abhorrent to the elementary concept of natural justice that no material should be accepted without being tested. If the assessee gets an opportunity by cross-examination, he can establish that the accounts of the third party are wrong and manipulated to suit the interest of the third party, or that they were intended to be adversely used against the assessee with whom the third party had inimical relationship. It is difficult to accept the contention in such a case, that the ample and reasonable opportunity to be given to the assessee would not include within its sweep the right of cross-examination.'

11. In the light of the authorities, it seems to be a well-settled position that the rules of natural justice do require that, normally speaking, if the previous statement of a person is intended to be used as evidence against a party, it must be made available to the party against whom it is intended to be used and such party must be given a fair opportunity to explain the same or comment of it. What would amount to fair opportunity would depend upon the facts and circumstances of each case. It would also appear that if such a party makes a request to be allowed to cross-examine the person, who made the statement, for the purpose of meeting the statement or with a view to commenting thereon, such a request cannot, save in exceptional or special cases, be denied without violating the principles of natural justice.

12. In the present case, the applicants, in support of their returns showing the sales to M/s. Keshavji Hirji, had relied upon their books of account about the apparent regularity of which there is no dispute. The applicants have also filed the affidavits of one of their partners and a former employee. All this evidence was sought to be rejected by the Deputy Commissioner and the allowance granted by the lower authorities was sought to be reversed merely relying on the statement made by Keshavji before the Personal Assistant to the Collector of Sales Tax, the said Personal Assistant not being any of the authorities named under the relevant Sales Tax Laws at all, and the rojmel of Keshavji for the period from 30th October, 1951, to 11th August, 1952, which was in the possession of the Sales Tax Officer, Enforcement Branch, presumably pursuant to a seizure. Moreover, it is significant that the declarations in respect of the sales to M/s. Keshavji Hirji purporting to be signed by Keshavji had been produced by the applicants before the sales tax authorities and the order of the Deputy Commissioner does not show that he rejected the contention of the applicants that these declarations had been signed by Keshavji. In fact, the Assistant Collector had accepted that these declarations were signed by Keshavji and all that the Deputy Commissioner has done is to observe that it cannot be surmised under what circumstances these declarations has been furnished by Keshavji Hirji. This itself is somewhat curious. Once it was accepted that the declarations were singed by Keshavji Hirji, it was for the taxing authorities to establish that the circumstance under which they were furnished by Keshavji Hirji were such as to cast doubt on the genuineness of the sales referred to in the declarations. We cannot overlook that, in the normal course of events, it could not be expected that the sales to M/s. Keshavji Hirji would have been taken place before a number of independent witnesses in the market, and, normally speaking, the only person who would be aware of these sales would be the partners of the applicants and Keshavji and his servants. In these circumstances, the best and probably the most effective way in which the allegation of Keshavji could have been disproved by the applicants was by the cross-examination of Keshavji, and denial of an opportunity to the applicants to cross-examine Keshavji, in spite of their demand, in our view, clearly amounts to a violation of the principles of natural justice. In fact, we must state that it was fairly conceded by Mr. Andhyarujina that it was not disputed by him that, if we came to the conclusion that the demand made by the applicants for the cross-examination of Keshavji before the Assistant Collector still continued before the Deputy Commissioner, the order of the Deputy Commissioner must be held to violate the principles of natural justice as having been made without affording an opportunity to the applicants to cross-examine Keshavji.

13. We may point out that even assuming for a moment that the proceedings under the notice dated 16th May, 1958, could be considered as independent proceedings, we are still of the view that, in the facts and circumstances of this case, the Deputy Commissioner should have taken note of the demand made by the applicants before the Assistant Collector for the cross-examination of Keshavji and should have afforded the applicants an opportunity to cross-examine Keshavji. It is clear that the fact of such a demand having been made appeared on the face of the record, which was before the Deputy Commissioner, and the order of the Deputy Commissioner shows that he had perused the record. The request of the applicants to read the letter written by Keshavji on 24th November, 1952, also suggests that the applicants intended to cross-examine Keshavji. There was nothing on the record to show that the applicants might have abandoned their intention to cross-examine Keshavji, which was evidenced by their earlier demand, and, if at all, the record suggested to the contrary. In view of this and the other facts and circumstances, which we have adverted to earlier, in our view, it was the duty of the Deputy Commissioner to have given an opportunity to the applicants to cross-examine Keshavji, if they so desired, and his failure to give such an opportunity amounts to a violation of the principles of natural justice. In our opinion, the order of the Deputy Commissioner is bad in law on this ground alone and the order of the Tribunal is also bad in law for the same reason. But, in view of several other contentions having been raised before us, we propose to consider even such further contentions.

14. The next contention of Mr. Shah was that there was a violation of the principles of natural justice in so far as the statement made by Keshavji before the Personal Assistant to the Collector and the letter dated 24th November, 1952, written by Keshavji were neither shown to the applicants nor were copies of the same given to them. The questionnaire served by the Additional Collector and the order of the Deputy Commissioner clearly show that for the adverse conclusion reached against the applicants regarding the sales to M/s. Keshavji Hirji, reliance has been placed on the statement made by Keshavji to the Personal Assistant to the Collector on 10th September, 1952, on the letter of Keshavji dated 24th November, 1952, and on the entries, or rather the lack of entries about the alleged sales in the rojmel of Keshavji. In their reply to the questionnaire the applicants have clearly pointed that they had never been informed about the said letter or the interview which Keshavji had with the Personal Assistant to the Collector and specifically requested for an opportunity to read the said letter of Keshavji. The order of the Deputy Commissioner shows that this request of the applicants was denied on the ground of public interest, although the Deputy Commissioner has not cared to mention as to what was the nature of public interest which prevented him from acceding to that request. The order of the Deputy Commissioner makes it clear that all that was conveyed to the applicants was, what he calls, 'the gist of the information laid (by Keshavji) before the department'. There is nothing on the record to show as to what this gist was, it being the admitted position that communication of this gist was merely oral. In this connection, it must be noticed, as we have already pointed out, that the Deputy Commissioner has not stated anywhere as to what was the nature of public interest which prevented him from disclosing the said letter addressed by Keshavji or from informing the applicants of the statement made by Keshavji. It is also significant that the Deputy Commissioner has nowhere stated as to whether the gist of the information, which is referred to by him, is derived from the statement of Keshavji or from his letter or as to the person to whom this letter was addressed. We could have understood the ground of public interest had the information in question been given by some third party as a mere information. But, here, Keshavji was the very person, who, according to the applicants, had made the purchases so that he was a party to the transactions and, in fact, his identity was disclosed to the applicants. In these circumstances, we fail to understand why the Deputy Commissioner could not have at least furnished to the applicants a copy of the said letter of Keshavji deleting only those portions, which, according to him, it was in the public interest to delete, and he could also have furnished to the applicants a transcript of the statement made by Keshavji to the Personal Assistant to the Collector deleting only such portion which the public interest prevented him from disclosing. In connection with this question, the observations of a Division Bench of this Court in Gyanchand Santlal Jain v. Union of India (Special Civil Applications Nos. 140 and 141 of 1971 decided by Tulzapurkar and Kania, JJ., on 10th/13th October, 1975, the judgment having been delivered by Tulzapurkar, J.) can be usefully set out. These observations are as follows :

'In other words, it seems to be a fairly settled position in law that it is not necessary that persons whose statements have been previously recorded must be examined in the presence of the party against whom such previous statements are intended to be used. The rules of natural justice do require that their previous statements must be made available to the party against whom they are intended to be used and such party must be given a fair opportunity to explain the same or comment on them.'

15. Reference may also be made to the decision of a Division Bench of the Gujarat High Court in Special Civil Application No. 990 of 1968 decided on 3rd July, 1970, by Bhagwati, C.J., and T. U. Mehta, J., [the judgment having been delivered by Bhagwati, C.J. (as he then was)]. In that case, the petitioner challenged an order of reassessment passed by the Sales Tax Officer. One of the grounds on which this order was challenged was non-compliance with the principles of natural justice on the part of the Sales Tax Officer in so far as he had failed to supply to the petitioner copies of the two statements made by one Govindlal Mohanlal and Ishwarlal Hariram respectively though these two statements were very material for the purpose of reassessment proceedings. It was observed by the learned Judges that this contention of the petitioner was clearly well-founded. The relevant observations in this decision run as follows :

' ....... So far as the statement made by Govindlal Mohanlal on 30th March, 1965, is concerned, the only reason why the Sales Tax Officer declined to give a copy of it to the petitioner was that it was a statement given by the informant and the Sales Tax Officer was, therefore, not bound to supply a copy of it to the petitioner. This reason is wholly unjustified. Even if a statement is given by the informant, the Sales Tax Officer must give a copy of it to the assessee if he proposes to rely upon it for the purpose of making the order of reassessment.'

16. Reference may also be made to the decision of the Rajasthan High Court in Ramanand v. D. M. Engineer, Northern Railway . In that case, the substance of the charge against the petitioner, who was a railway servant, was that he had failed to show any improvement in his working during the past few years in spite of bad confidential reports against him. It was held that it was implicit in this allegation that his various failings had been mentioned in the confidential reports, and quite obviously the improvement that was expected of him was in those respects in which he had been found deficient as mention in the various confidential reports made against him from time to time. Therefore, in fairness and in order to provide him with a reasonable opportunity of defending himself against the charge of failure to improve, these confidential reports should have been made available to him.

17. As against these decisions, Mr. Andhyarujina referred us to the decision of the Supreme Court in Hira Nath v. Rajendra Medical College, Ranchi : (1973)IILLJ111SC . In that case, an enquiry was held by an enquiry committee consisting of three respectable and independent members of the staff as appointed by the Principal of a Medical College to enquire into the complaint of the inmates of the girls' hostel against certain made students of that college about their indecent behaviour with them in the hostel compound itself during odd hours of night. It was held that, in such a case, the rules of natural justice do not require hat statement of the girl students should be recorded in the presence of the male students concerned or that the latter should be furnished with the report of the enquiry committee. In that case, the girl students had made a complaint that on the night between 10th and 11th June, 1972, some male students of the college were found sitting on the compound wall of the girls' hostel. Later, they entered the compound and were seen walking without clothes on them. They went near the windows of the rooms of some of the girls and tried to pull the hand of one of the girls. Some of these boys then climbed up along the drain pipes to the terrace of the girls' hostel where a few girls were doing their studies. On seeing them the girls raised an alarm following which the male students ran away. It was regarding this incident that the aforesaid complaint was made by the girl students which led to the enquiry in question. All that has been decided in that case is that in the peculiar circumstances of the case, requirements of natural justice were fulfilled by the handing over of the written charge to the male students concerned and asking them to state whatever they had to state in writing. The report of the case shows that the complaint made against the male students was explained to them. The report also shows that the statements of the girl students were recorded and it was only after careful examination of these statements and the explanations of the male students that the said report was made by the enquiry committee. This is a case which is so different from the case before us that the two bear no comparison whatsoever. It was an extreme case where disclosure of the names of the girl students who made the complaint would have certainly led to the harassment of these girl students. The enquiry committee, as already pointed out, has carefully sifted the evidence which was given by the girl students. It has been further pointed out that the authorities of the college were in loco parentis to all the students - male and female - who were living in the hostel and the responsibility towards the young girl students was greater because their guardians had entrusted them to their care by putting them in the hostel attached to the college. It is well-established that the rules of natural justice are not like fixed rules of law. What natural justice requires is that a party against whom a charge is made should be given an adequate and reasonable opportunity of meeting the same. The requirement of disclosing the statements made by persons against such a party and intended to be relied on against that party arises out of this principle. What constitutes a reasonable opportunity to be afforded to such a party must necessarily depend upon the facts and circumstances of each case. In a case like the one before the Supreme Court the said requirement could be said to have been well-met though the statements made by the girl students or their names were not disclosed to the male students against whom the charge was made. In the case before us, however, there are no such facts or circumstances which justified the holding back from the applicants of the statement made by Keshavji to the Personal Assistant to the Collector or of his letter apart from the actual portions thereof, the disclosure of which might have been considered by the Deputy Commissioner as against public interest. The question was after all one of suo motu revision under the provisions of the Bombay Sales Tax Act, whereby sales which had been allowed as deductions out of the taxable turnover, on the ground that they were made to registered dealers, were sought to be disallowed. The identity of Keshavji as we have already pointed out, was disclosed to the applicants. There was no serious attempt to sift the evidence or test the truth of the statement made by Keshavji to the Personal Assistant to the Collector or of the statements contained in Keshavji's said letter, as we shall presently point out. Such a case bears no comparison to the case before the Supreme Court referred to by Mr. Andhyarujina. Therefore, the said decision can be of no assistance to the respondent in the present case.

18. The next decision relied on by Mr. Andhyarujina was the decision of the Court of Appeal in Regina v. Gaming Board, Ex parte Benaim [1970] 2 Q.B. 417. In that case, two French nationals who in 1967 took up residence in the United Kingdom, contracted to buy the controlling shares in Crockford's, an old-established London gaming club, and later became joint managing directors of the club. They applied to the Gaming Board for Great Britain for a certificate of consent to entitle them to apply for a licence for the premises, as required by the Gaming Act, 1968. At an interview the applicants were asked a wide range of questions based on information already in the Board's possession. The source and the detailed content of the information on which the applicants were questioned by the Board was not disclosed to them. The certificate was refused by the Board. The applicants moved the Court of Appeal for a writ of certiorari to quash the decision of the Board. It was, inter alia, held that the Board had acted fairly and in accordance with natural justice in relation to the applicants and, therefore, the court would not interfere with their determination. We are afraid, this case also is so different on facts from the case before us that it bears no comparison. In that case, the applicants were voluntarily applying for a licence to run a gaming club, it being the undisputed position that they had no legal right as such to run the same without a licence. In case before us, as we have already pointed out, the Sales Tax Officer and the Assistant Collector had already allowed as deductions in the revisional proceedings. This case also bears no comparison with the present case.

19. Reference was next made by Mr. Andhyarujina to the decision of the Court of Appeal in the case on In re Pergamon Press Ltd. [1971] 1 Ch. 388. In that case, Inspectors were appointed by the Board of Trade under the Companies Act, 1948, to investigate the affairs of a company and report thereon. The directors claimed that the inquiry should be conducted by the Inspectors as if it were a judicial inquiry in a court of law. This contention was negatived. Although the directors were not permitted to see the transcript of the evidence or the documents which might be used against them, it was yet held that, in the circumstances of the case, the Inspectors had acted fairly and properly. This case again is totally different in its facts from the case before us. It was a case regarding an enquiry by the Inspectors into the affairs of the company and these Inspectors were to make a report on which further action was to follow. The case before us, as we have already pointed out, is of an assessment under the Bombay Sales Tax Act. The two cases bear no comparison. Hence, this decision also does not help the respondent in this case. Reliance was next placed by Mr. Andhyarujina on the decision of the Andhra High Court in Madugula Papayya v. Province of Madras [1956] 7 S.T.C. 180. That case arose under the Madras General Sales Tax Act, 1939. It was held there that when an assessee did not place the material on which the officer could make a proper assessment, he could take steps to procure the materials and proceed in the manner specified in the relevant rules. It was further held that the material on which the officer could act might not be acceptable as evidence by a court of law and the sufficiency or otherwise of it did not fail to be decided by a court of law. It was observed in that case that the power to make private enquiries was implicit in rule 8 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, and the taxing officer was under no obligation to supply the assessee with copies of confidential statements. This case turns to a certain extent on the provisions of rule 8 referred to above. Apart from this, it was a case where the assessee did not place before the taxing officer the material on which the taxing officer could make a proper assessment. Such a case is again different from the case before us, where the applicants had furnished to the taxing authorities all their books of account. Moreover, apart from this, the position regarding disclosure of a statement sought to be relied on against a party has been well-settled in the subsequent decisions to which we have already referred to earlier. This decision of the Andhra High Court also, in our view, does not help the respondent in the present case.

20. In our view, when a conclusion adverse to a party is sought to be arrived at by the authority, there is generally speaking a duty case on it to disclose to that party the material sought to be relied on against him in the case before it. As we have already pointed out, the question in the case before us relates to disallowance of certain sales in the assessment proceedings under the Bombay Sales Tax Act. The facts and circumstance, which we have referred to in some detail earlier, do not disclose any sufficient reason why the request of the applicants to be allowed to read Keshavji's letter could not have been complied with. In the circumstances of the case, it was the duty of the Deputy Commissioner to disclose to the applicants the transcript of the statement of Keshavji made to the Personal Assistant to the Collector as well as the letter of Keshavji excluding from both only such portions as, in the opinion of the Deputy Commissioner, were not fit for disclosure in the public interest. As the Deputy Commissioner has failed to do this, the order of the Deputy Commissioner is bad on the ground of non-compliance with the principles of natural justice and the order of the Tribunal which upholds the order of the Deputy Commissioner is also bad on the same ground.

21. The next submission of Mr. Shah was that, apart from the two grounds which we have already mentioned above, the order of the Deputy Commissioner and that of the Tribunal were perverse and violated the principles of natural justice, as no reasons have been given for relying on the statement and letter of Keshavji and on the entries or rather the lack of entries about purchases from the applicants in his rojmel, in preference to the evidence tendered by the applicants by way of the two affidavits referred to earlier, and the books of account of the applicants. In connection with this argument, it is beyond dispute that it is not open to us in any manner to reappreciate the evidence. The only question is whether the approach of the Deputy Commissioner to the evidence, which has been upheld by the Tribunal, was such as could be considered to be perverse. In this connection, it is well to bear in mind that the question before the Deputy Commissioner was of disallowing the sales which had already been allowed as deductions out of the taxable turnover by the lower taxing authorities. Reliance was placed on the statement made by Keshavji to the Personal Assistant to the Collector, the said Personal Assistant not being an authority designated under the sales tax laws. Reliance was also placed on the letter of Keshavji, although it is not on record to whom this letter was addressed. Apart from a bare comment that the statement of Keshavji or the information given by Keshavji finds support from the entries in his rojmel, there has been no attempt whatsoever to sift the evidence and to find out as to whether what Keshavji had stated was true. It does not appear that the Deputy Commissioner or any other taxing authority bothered to ask Keshavji any question to ascertain whether what he was saying was the truth. No such attempt was made although it was pointed out by the applicants that Keshavji was an absconder, who had not paid his taxes, and the further fact which seem to have been totally overlooked is that the applicants had produced declarations signed by Keshavji regarding the sales disputed by the taxing authorities. The finding of the Deputy Commissioner shows that it was not seriously disputed before him that these declarations were signed by Keshavji, all that was observed being that it could not be surmised under what circumstances these declarations were furnished by Keshavji Hirji. As against this, the evidence contained in the affidavits of Damji Vasanji and Manilal Bhavanji, which was supported by the regular books of account of the applicants, seems to have been rejected merely on the ground that these persons were interested. In the first place, if they were interested in deposing in a particular way, it is obvious that Keshavji was all the more interested in denying the sales to him, because if he had made the purchases, it would have rendered him liable to pay tax and the penalty. We may also refer to the decision in Mehta Parikh & Co. v. Commissioner of Income-tax [1956] 30 I.T.R. 181, which lends support to the argument of Mr. Shah that where affidavits had been tendered by the applicants it was not open to the Deputy Commissioner to reject the same without even bothering to cross-examine the deponents thereof. In the case before us, although the applicants had clearly stated to the Deputy Commissioner that Damji Vasanji and Manilal Bhavanji would be made available for cross-examination, if so desired, the Deputy Commissioner has chose to reject the statements in their affidavits without bothering to cross-examine them at all. Quite apart from this, we fail to see what interest Manilal Bhavanji, who was merely an ex-employee of the applicants, could be said to have in the matter and as to how the statements contained in his affidavit could be rejected on this ground. At this stage, reference can usefully be made to the decision of the Kerala High Court in M. Appukutty v. Sales Tax Officer, Kozhikode [1966] 17 S.T.C. 380, where it has been held that if the quasi-judicial authority disregards the materials available or if it refused to apply its mind to the question and if it reaches a conclusion which bears no relation to the facts before it, to allow those decisions to stand would be violative of the principles of natural justice. Applying this principle to the case before us, we are of the view that the said finding of the Deputy Commissioner is vitiated on account of the violation of the principles of natural justice. The entire approach adopted by him has been thoroughly unfair and no attempt has been made to sift or appreciate the evidence which was before him. Such a finding clearly violates the principles of natural justice.

21. It was sought to be contended by Mr. Shah that even taking the finding of the Deputy Commissioner and the Tribunal as correct, what the Deputy Commissioner and the Tribunal held was that there were no genuine sales by the applicants to M/s. Keshavji Hirji and, if such was the case, according to Mr. Shah, the amount representing these sales to M/s. Keshavji Hirji could not have been added to the taxable turnover of the applicants at all. It was pointed out by Mr. Shah that before the amount of these sales could be included in the taxable turnover, it should have been found that the sales were genuine or did in fact take place but the same were not to M/s. Keshavji Hirji as claimed by the applicants. In support of this contention, Mr. Shah referred us to the decision in Santumal v. Assistant Commissioner of Sales Tax [1963] 14 S.T.C. 287 decided by a Division Bench of this Court. Although this contention does not appear to us to be without merits, it is not open to us to go into the same, because the question referred to us is only as to whether the finding that the sales made to M/s. Keshavji Hirji were not genuine is contrary to the rules of natural justice, arbitrary, perverse and illegal.

22. In the result, in our view, the question posed for our consideration must be answered in the affirmative. As far as the costs are concerned, taking into account the length of time for which the matter has gone on and the fact that both the sides have briefed more than one counsel, we think that it is proper that the respondent should be directed to pay to the applicants a sum of Rs. 1,500 as the quantified costs of this reference.